76R11515 DB-D
By Eiland, et al. H.B. No. 1089
Substitute the following for H.B. No. 1089:
By Lewis of Tarrant C.S.H.B. No. 1089
A BILL TO BE ENTITLED
1-1 AN ACT
1-2 relating to fraternal benefit societies.
1-3 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-4 SECTION 1. Article 10.01(b), Insurance Code, is amended to
1-5 read as follows:
1-6 (b) A characteristic of a fraternal benefit society as
1-7 defined by Section (a) of this article is that control must be
1-8 ultimately vested in the membership as provided by this article,
1-9 Articles 10.02 and 10.03 of this code, and other provisions of this
1-10 chapter, and that control of the fraternal benefit society may be
1-11 exercised by lodges and a supreme legislative or governing body
1-12 elected in the manner provided by Article 10.03 of this code. The
1-13 methods provided by this section for exercising control over a
1-14 fraternal benefit society are exclusive. In this section,
1-15 "control" has the meaning assigned by Section 2(d) [2(c)], Article
1-16 21.49-1, of this code.
1-17 SECTION 2. Article 10.03, Insurance Code, is amended to read
1-18 as follows:
1-19 Art. 10.03. REPRESENTATIVE FORM OF GOVERNMENT DEFINED. A
1-20 society has a representative form of government if:
1-21 (1) the society has a supreme governing body
1-22 constituted:
1-23 (A) as an assembly as described by Article
1-24 10.03A of this chapter; or
2-1 (B) as a board as described by Article 10.03B of
2-2 this chapter;
2-3 (2) the officers of the society are elected by the
2-4 supreme governing body or by the board of directors;
2-5 (3) only benefit members are eligible to serve as
2-6 members of the supreme governing body, the board of directors, or
2-7 an intermediate assembly of the society;
2-8 (4) only benefit members may vote on the management of
2-9 insurance affairs of the society;
2-10 (5) a voting member of the society has only one vote;
2-11 and
2-12 (6) a voting member may not cast a vote by proxy. [Any
2-13 society shall be deemed to have a representative form of government
2-14 when it shall provide in its constitution and laws for a supreme
2-15 legislative or governing body, composed of representatives elected
2-16 either by the members or by delegates elected directly or
2-17 indirectly by the members, together with such other members as may
2-18 be prescribed by its constitution and laws; provided, that the
2-19 elective members shall constitute a majority in number and not less
2-20 than the number of votes required to amend its constitution and
2-21 laws; and provided, further, that the meetings of the supreme or
2-22 governing body, and the election of officers, representatives or
2-23 delegates shall be held as often as once in four calendar years.
2-24 No member under age sixteen shall have voice or vote in the
2-25 management of the society. No member, officer, representative or
2-26 delegate shall vote by proxy.]
2-27 SECTION 3. Chapter 10, Insurance Code, is amended by adding
3-1 Article 10.03A to read as follows:
3-2 Art. 10.03A. ASSEMBLY AS FORM OF SUPREME GOVERNING BODY;
3-3 BOARD OF DIRECTORS. (a) The supreme governing body is an assembly
3-4 if it is composed of:
3-5 (1) delegates elected directly by the members or at
3-6 intermediate assemblies or conventions by the members or their
3-7 representatives; and
3-8 (2) other delegates as prescribed by the society's
3-9 laws.
3-10 (b) A society may provide for election of delegates by mail.
3-11 (c) The elected delegates to the assembly must:
3-12 (1) constitute a majority of the assembly in number;
3-13 and
3-14 (2) be entitled to the greater of:
3-15 (A) two-thirds of the votes in the assembly; or
3-16 (B) the number of votes required to amend the
3-17 society's laws.
3-18 (d) The assembly shall:
3-19 (1) meet at least once every four years; and
3-20 (2) elect a board of directors to conduct the business
3-21 of the society between meetings of the assembly.
3-22 (e) A vacancy on the board of directors that occurs between
3-23 elections may be filled as prescribed in the society's laws.
3-24 SECTION 4. Chapter 10, Insurance Code, is amended by adding
3-25 Article 10.03B to read as follows:
3-26 Art. 10.03B. BOARD AS FORM OF SUPREME GOVERNING BODY. (a)
3-27 The supreme governing body is a board if it is composed of:
4-1 (1) persons elected either directly by the members or
4-2 at intermediate assemblies by the members or their representatives;
4-3 and
4-4 (2) other persons as prescribed by the society's laws.
4-5 (b) A society may provide for election of the board by mail.
4-6 (c) The persons elected to the board must:
4-7 (1) constitute a majority of the board in number; and
4-8 (2) have at least the number of votes required to
4-9 amend the society's laws, other than laws of the society, if any,
4-10 that must be amended by direct vote of the members.
4-11 (d) The term of a board member may not exceed four years.
4-12 (e) A vacancy on the board that occurs between elections may
4-13 be filled in the manner prescribed by the society's laws. A person
4-14 filling the unexpired term of an elected board member is considered
4-15 to be an elected member.
4-16 (f) A board shall meet at least once each year to conduct
4-17 the business of the society.
4-18 SECTION 5. Chapter 10, Insurance Code, is amended by adding
4-19 Article 10.03-1 to read as follows:
4-20 Art. 10.03-1. DEFINITIONS. In this chapter:
4-21 (1) "Benefit contract" means the agreement for
4-22 provision of benefits authorized by Article 10.05 of this chapter,
4-23 as that agreement is described in Article 10.15 of this chapter.
4-24 (2) "Benefit member" means an adult member who is
4-25 designated by the laws or rules of the society as a benefit member
4-26 under a benefit contract.
4-27 (3) "Certificate" means a document issued as written
5-1 evidence of a benefit contract.
5-2 (4) "Laws" means a society's articles of
5-3 incorporation, constitution, and bylaws, however designated.
5-4 (5) "Lodge" means a subordinate member unit of a
5-5 society, including a camp, court, council, or branch.
5-6 (6) "Premiums" means a premium, a rate, dues, or other
5-7 required contributions that are payable under a certificate or
5-8 benefit contract.
5-9 (7) "Rules" means a rule, regulation, or resolution
5-10 adopted by the supreme governing body or board of directors that
5-11 has general application to the members of the society.
5-12 SECTION 6. Article 10.05, Insurance Code, is amended to read
5-13 as follows:
5-14 Art. 10.05. BENEFITS. (a) [(1)] A society authorized to do
5-15 business in this State may provide for the payment of:
5-16 (1) [(a)] Death benefits in any form;
5-17 (2) [(b)] Endowment benefits;
5-18 (3) [(c)] Annuity benefits;
5-19 (4) [(d)] Temporary or permanent disability benefits
5-20 as a result of disease or accident;
5-21 (5) [(e)] Hospital, medical or nursing benefits due to
5-22 sickness or bodily infirmity or accident;
5-23 (6) [(f)] Monument or tombstone benefits to the memory
5-24 of deceased members [not exceeding in any case the sum of Three
5-25 Hundred Dollars ($300)];
5-26 (7) Funeral [(g) For the payment of funeral]
5-27 benefits; [,] and
6-1 (8) Any other benefit that may be provided by a life,
6-2 accident, or health insurance company, provided that the benefit
6-3 is:
6-4 (A) offered in compliance with Chapter 3 of this
6-5 code; and
6-6 (B) consistent with this chapter.
6-7 (b) A society shall:
6-8 (1) specify in its laws or rules those persons to whom
6-9 a certificate may be issued or who may be covered by benefits; and
6-10 (2) make the provision of those benefits consistent
6-11 with the provision of benefits to members and their beneficiaries.
6-12 (c) A society may appoint a legal reserve life insurance
6-13 agent licensed by the department under Chapter 213, Acts of the
6-14 54th Legislature, Regular Session, 1955 (Article 21.07-1, Vernon's
6-15 Texas Insurance Code), to sell benefits listed under Subsection (a)
6-16 of this article to society members.
6-17 (d) A society may offer a benefit under Subsection (a)(8) of
6-18 this article only if the person who sells the benefit is licensed
6-19 by the department as a legal reserve life insurance agent under
6-20 Chapter 213, Acts of the 54th Legislature, Regular Session, 1955
6-21 (Article 21.07-1, Vernon's Texas Insurance Code).
6-22 [(2) Such benefits may be provided on the lives of
6-23 members or, upon application of a member, on the lives of the
6-24 member's family, including the member, the member's spouse and
6-25 minor children, in the same or separate certificates.]
6-26 SECTION 7. Article 10.07(a), Insurance Code, is amended to
6-27 read as follows:
7-1 (a) Fraternal benefit societies shall establish reserves for
7-2 the types of coverage specified in Articles 10.05(a)(4) and (5)
7-3 [Article 10.05(1)(d) and (e)] of this code in the same manner and
7-4 to the same extent as required for companies organized under
7-5 Chapter 3 of this code except:
7-6 (1) for certificates issued during the calendar year
7-7 1988, only one-third of the unearned premium reserve is required to
7-8 be maintained during the first policy year; and
7-9 (2) for certificates issued during the calendar year
7-10 1989, only two-thirds of the unearned premium reserve is required
7-11 to be maintained during the first policy year.
7-12 SECTION 8. Article 10.12, Insurance Code, is amended to read
7-13 as follows:
7-14 Art. 10.12. QUALIFICATIONS FOR MEMBERSHIP; GRIEVANCE
7-15 PROCEDURES. (a) A society shall specify in its laws or rules:
7-16 (1) the eligibility standards for each membership
7-17 class, provided that if benefits are provided on the lives of
7-18 children, the minimum age for adult membership is not less than 15
7-19 years of age and not more than 21 years of age;
7-20 (2) the process for admission for each membership
7-21 class; and
7-22 (3) the rights and privileges of each membership
7-23 class, provided that only benefit members may vote on the
7-24 management of the insurance affairs of the society.
7-25 (b) A society may admit social members. A social member may
7-26 not vote in the management of the insurance affairs of the society.
7-27 (c) Membership rights in the society are personal to the
8-1 member. A member may not assign membership rights.
8-2 (d) A society may provide in its laws or rules for grievance
8-3 or complaint procedures for members.
8-4 (e) [MEMBERS AND BENEFICIARIES. Any person may be admitted
8-5 to beneficial, or general, or social membership in any society in
8-6 such manner and upon such showing of eligibility as the laws of the
8-7 society may provide, and any beneficial member may direct any
8-8 benefit to be paid to such person or persons, entity, or interest
8-9 as may be permitted by the laws of the society; provided, that no
8-10 beneficiary shall have or obtain any vested interest in the said
8-11 benefit until the same has become due and payable in conformity
8-12 with the provisions of the contract of membership, and the member
8-13 shall have full right to change his beneficiary, or beneficiaries,
8-14 in accordance with the laws, rules, and regulations of the
8-15 society.]
8-16 Nothing contained in this chapter shall be construed to
8-17 affect or apply to societies which admit to membership only persons
8-18 engaged in one or more hazardous occupations, in the same or
8-19 similar lines of business.
8-20 SECTION 9. Chapter 10, Insurance Code, is amended by adding
8-21 Article 10.12-1 to read as follows:
8-22 Art. 10.12-1. BENEFICIARIES. (a) The owner of a benefit
8-23 contract may change the beneficiary at any time in accordance with
8-24 the laws or rules of the society unless the owner waives this right
8-25 by specifically requesting in writing that the beneficiary
8-26 designation be irrevocable. A society may, through its laws or
8-27 rules, limit the scope of beneficiary designations and shall
9-1 provide that a person whose designation as beneficiary is revocable
9-2 may not have or obtain a vested interest in the proceeds, in
9-3 conformity with the benefit contract.
9-4 (b) If, at the death of the deceased insured, a lawful
9-5 beneficiary to whom the proceeds of the benefit contract are
9-6 payable does not exist under the benefit contract, the amount of a
9-7 benefit under a benefit contract shall be paid:
9-8 (1) to the personal representative of the deceased
9-9 insured; or
9-10 (2) if the owner of the certificate is a person other
9-11 than the deceased insured, to the owner of the certificate.
9-12 (c) Subsection (b) of this article does not apply to the
9-13 extent funeral benefits may be paid under the benefit contract.
9-14 SECTION 10. Article 10.15, Insurance Code, is amended to
9-15 read as follows:
9-16 Art. 10.15. CERTIFICATE. (a) Every certificate issued by
9-17 any such society shall specify the amount of benefit provided
9-18 thereby, and shall provide that the certificate, the charter or
9-19 articles of incorporation, or, if a voluntary association, the
9-20 articles of association, the constitution and laws of the society,
9-21 and the application for membership and medical examination, signed
9-22 by the applicant, and all amendments to each thereof, shall
9-23 constitute the agreement between the society and the member, and
9-24 copies of the same, certified by the secretary of the society, or
9-25 corresponding officer, shall be received in evidence of the terms
9-26 and conditions thereof. Any changes, additions or amendments to
9-27 said charter or articles of incorporation, or articles of
10-1 association, or constitution or laws duly made or enacted
10-2 subsequent to the issuance of the benefit certificates shall bind
10-3 the member and the member's [his] beneficiaries, and shall govern
10-4 and control the agreement in all respects the same as though such
10-5 changes, additions or amendments had been made prior to and were in
10-6 force at the time of the application for membership.
10-7 (b) A certificate may not be delivered or issued for
10-8 delivery in this state unless the form of the certificate has been
10-9 filed with the department under Article 3.42 of this code. A life,
10-10 accident, health, or disability insurance certificate or annuity
10-11 certificate issued by a society must meet the requirements
10-12 applicable to similar policies issued by an insurer in this state
10-13 that are not inconsistent with this chapter as determined by rule
10-14 of the commissioner.
10-15 (c) A society shall include in the terms of a certificate a
10-16 grace period of one month for payment of premiums.
10-17 (d) Each certificate must state the amount of premiums that
10-18 are payable under the certificate.
10-19 (e) If the laws of the society provide for expulsion or
10-20 suspension of a member, the certificate must provide that a member
10-21 who is expelled or suspended may maintain the certificate in force
10-22 by continuing payment of the required premium, unless the expulsion
10-23 or suspension:
10-24 (1) is for nonpayment of a premium; or
10-25 (2) occurs within the contestable period of the
10-26 benefit contract and is for material misrepresentation in the
10-27 application for membership or insurance.
11-1 (f) A life insurance benefit contract issued on the life of
11-2 a person who is younger than the society's minimum age for adult
11-3 membership may provide for transfer of control or ownership to the
11-4 insured at an age specified in the certificate. A society may
11-5 require approval of an application for membership in order to
11-6 effect the transfer and may provide in all other respects for the
11-7 regulation, government, and control of certificates and rights,
11-8 obligations, and liabilities incident and connected to the
11-9 certificate. Ownership rights under the certificate before a
11-10 transfer must be specified in the certificate.
11-11 (g) A society may specify the terms and conditions for the
11-12 assignment of a life insurance benefit contract.
11-13 SECTION 11. Article 10.18, Insurance Code, is amended by
11-14 adding Subsection (c) to read as follows:
11-15 (c) A society may, pursuant to a resolution of its supreme
11-16 governing body, establish and operate one or more separate accounts
11-17 and issue benefit contracts on a variable basis, subject to the
11-18 provisions of law regulating a life insurance company that
11-19 establishes those types of accounts and issues those types of
11-20 contracts. In order to comply with applicable federal or state
11-21 laws or rules, the society may:
11-22 (1) issue contracts on a variable basis to which
11-23 Articles 10.15 and 10.30(e) of this chapter do not apply; and
11-24 (2) adopt special procedures for the conduct of the
11-25 business and affairs of a separate account and provide special
11-26 voting and other rights for a person having beneficial interests in
11-27 a separate account, including special procedures and rights
12-1 relating to:
12-2 (A) investment policy;
12-3 (B) investment advisory services;
12-4 (C) selection of certified public accountants;
12-5 and
12-6 (D) selection of a committee to manage the
12-7 business and affairs of the account.
12-8 SECTION 12. Article 10.19, Insurance Code, is amended to
12-9 read as follows:
12-10 Art. 10.19. QUALIFICATION. (a) Hereafter, only such
12-11 corporation, society, order of voluntary association, having not
12-12 less than five hundred (500) members and ten (10) subordinate
12-13 lodges, without capital stock organized and carried on solely for
12-14 the mutual benefit of its members, and not for profit, and having a
12-15 lodge system and representative form of government, or which limits
12-16 its membership to a secret fraternity having a lodge system and
12-17 representative form of government, may, provided that it has been
12-18 in continuous operation for a period of not less than five (5)
12-19 years immediately preceding the filing of its articles of
12-20 incorporation or association as hereinafter provided, qualify as a
12-21 Fraternal Benefit Society as defined in Article 10.01 for the
12-22 purpose of providing for the payment of benefits as provided in
12-23 Article 10.05, by filing with the department [Board] duly certified
12-24 articles of incorporation or association. Such articles shall set
12-25 out:
12-26 (1) [1.] The name of the society, which shall not so
12-27 closely resemble the name of any society or insurance company
13-1 already transacting business in this state as to mislead the public
13-2 or lead to confusion.
13-3 (2) [2.] The purpose for which it is formed, which
13-4 shall not include more liberal powers than are granted by this
13-5 Chapter. Any lawful, social, intellectual, educational,
13-6 charitable, benevolent, moral, fraternal, patriotic, or religious
13-7 advantages may be set forth among the purposes of the society, and
13-8 the mode in which its corporate powers are to be exercised. These
13-9 purposes may be carried out directly by the society or indirectly
13-10 through subsidiary corporations or affiliated organizations.
13-11 (b) Such articles of incorporation or association and duly
13-12 certified copies of the Constitution and laws, rules and
13-13 regulations, and copies of all proposed forms of benefit
13-14 certificates, applications therefor and circulars to be issued by
13-15 such society, and a bond in the sum of not less than Three Hundred
13-16 Thousand Dollars ($300,000.00) and not more than One Million Five
13-17 Hundred Thousand Dollars ($1,500,000.00), as required by the
13-18 commissioner [Five Thousand Dollars ($5,000.00)], with sureties
13-19 approved by the commissioner [State Board of Insurance],
13-20 conditioned upon the return of the advance payments, as provided in
13-21 this article, to applicants, if the organization fails to qualify
13-22 within one (1) year, shall be filed with the commissioner, [such
13-23 Board] who may require such further information as the commissioner
13-24 [it] deems necessary, and if the purposes of the society conform to
13-25 the requirements of this law, and all provisions of law have been
13-26 complied with, the commissioner [said Board] shall so certify and
13-27 retain and record or file the articles of incorporation or
14-1 association and furnish the incorporators a preliminary certificate
14-2 authorizing said society to solicit from its members applications
14-3 for insurance benefits as hereinafter provided.
14-4 (c) Upon receipt of said certificate from the department
14-5 [State Board of Insurance], said society may solicit from its
14-6 members applications for insurance benefits for the purpose of
14-7 completing its qualification and shall collect from each applicant
14-8 the amount of not less than one (1) regular monthly payment, in
14-9 accordance with its table of rates as provided by its constitution
14-10 and laws, and shall issue to each such applicant a receipt for the
14-11 amount so collected. No such society shall incur any liability
14-12 other than for such advanced payments, nor issue any benefit
14-13 certificate nor pay or allow, or offer or promise to pay or allow,
14-14 to any person any death or disability benefit until actual bona
14-15 fide applications for death benefit certificates have been secured
14-16 upon at least five hundred (500) lives for at least Two [One]
14-17 Thousand Dollars ($2,000.00) [($1,000.00)] each, and all such
14-18 applicants for death benefits shall have been regularly examined by
14-19 legally qualified practicing physicians, and certificates of such
14-20 examination have been duly filed and approved by the chief medical
14-21 examiner of such society; nor until there shall be established ten
14-22 (10) subordinate lodges or branches into which said five hundred
14-23 (500) applicants have been initiated; nor until there has been
14-24 submitted to the department [said Board], under oath of the
14-25 president and secretary or corresponding officers of such society,
14-26 a list of such applicants, giving their names, addresses, date
14-27 examined, date approved, date initiated, name and number of the
15-1 subordinate branch of which each applicant is a member, amount of
15-2 benefits to be granted, rate of stated periodical contributions,
15-3 which shall be sufficient to provide for meeting the mortuary
15-4 obligation contracted, when valued for death benefits upon the
15-5 basis of the National Fraternal Congress Table of Mortality, as
15-6 adopted by the National Fraternal Congress, August 23, 1899, or any
15-7 higher standard, at the option of the society, and for disability
15-8 benefits by tables based upon reliable experience and for combined
15-9 death and permanent total disability benefits by tables based upon
15-10 reliable experience, with an interest assumption not higher than
15-11 four per cent (4%) per annum; nor until it shall be shown to the
15-12 department [Board] by the sworn statement of the treasurer or
15-13 corresponding officer of such society, that at least five hundred
15-14 (500) applicants have each paid in cash at least one (1) regular
15-15 monthly payment as herein provided per One Thousand Dollars
15-16 ($1,000.00) of indemnity to be effected, which payments in the
15-17 aggregate shall amount to at least One Hundred Fifty Thousand
15-18 Dollars ($150,000.00) [Twenty-Five Hundred Dollars ($2,500.00)];
15-19 all of which shall be credited to the mortuary or disability fund
15-20 on account of such applicants and no part of which may be used for
15-21 expenses.
15-22 (d) Said advanced payments shall, during the period of
15-23 completing qualification, be held in trust, and if such
15-24 qualification is not completed within one (1) year as hereinafter
15-25 provided, returned to said applicants.
15-26 (e) The department [Board] may make such examination and
15-27 require such further information as it deems advisable; and upon
16-1 presentation of satisfactory evidence that the society has complied
16-2 with all the provisions of law, the department [Board] shall issue
16-3 to such society a certificate to that effect. Such certificate
16-4 shall be prima facie evidence of the qualification of such society
16-5 at the date of such certificate. The department [Board] shall
16-6 cause a record of such certificate to be made and a certified copy
16-7 of such record may be given in evidence with like effect as the
16-8 original certificate.
16-9 (f) Unless the five hundred (500) applicants herein required
16-10 have been secured and the organization has qualified as a fraternal
16-11 benefit society as herein provided, the preliminary certificate
16-12 granted under the provisions of this article shall be null and void
16-13 after one (1) year from its date, or after such further period, not
16-14 exceeding one (1) year, as may be authorized by the department
16-15 [State Board of Insurance] upon cause shown.
16-16 (g) Provided, however, that this Article shall not apply to
16-17 societies specifically exempted from the provisions of Chapter 10
16-18 of the Insurance Code and provided further, that the above
16-19 provisions of this article shall not apply to Fraternal Benefit
16-20 Societies authorized to transact business in this state on June 1,
16-21 1965, so long as their licenses or renewals or extensions thereof
16-22 continue in force. The following provisions of this article shall
16-23 apply to such Fraternal Benefit Societies authorized to transact
16-24 business in this state on June 1, 1965.
16-25 (h) When any domestic society shall have discontinued
16-26 business for the period of one (1) year, or has less than four
16-27 hundred (400) members holding benefit certificates, its permanent
17-1 certificate shall become null and void. Every such society shall
17-2 have the power to make a constitution and bylaws for the government
17-3 of the society, the admission of its members, the management of its
17-4 affairs and the fixing and readjusting of the rates of contribution
17-5 of its members from time to time; and it shall have the power to
17-6 change, alter, add to, or amend such constitution and bylaws and
17-7 shall have such other powers as are necessary and incidental to
17-8 carrying into effect its object and purposes.
17-9 SECTION 13. Article 10.26, Insurance Code, is amended to
17-10 read as follows:
17-11 Art. 10.26. NO PERSONAL LIABILITY; INDEMNIFICATION OR
17-12 REIMBURSEMENT. (a) Officers and members of the supreme, grand or
17-13 any subordinate body of an [any such] incorporated society are
17-14 [shall] not [be] individually liable for the payment of any
17-15 disability or death benefit provided for in the laws and agreements
17-16 of the [such] society. Those payments are [The same shall be]
17-17 payable only out of the funds of the [such] society and in the
17-18 manner provided by its law.
17-19 (b) A society may indemnify and reimburse a person for
17-20 expenses reasonably incurred by, and liabilities imposed on, that
17-21 person in connection with or arising out of an action, suit, or
17-22 other proceeding, whether civil, criminal, administrative, or
17-23 investigative, in which the person is involved, or in connection
17-24 with or arising out of a threat of a proceeding against that
17-25 person, because that person is or was a director, officer,
17-26 employee, or agent of:
17-27 (1) the society; or
18-1 (2) a firm, corporation, or organization with which
18-2 the person served in any capacity at the request of the society.
18-3 (c) Except as provided by Subsection (d) of this article, a
18-4 person may not be indemnified or reimbursed in relation to:
18-5 (1) a matter in an action, suit, or other proceeding
18-6 in which the person is finally adjudged guilty of breach of a duty
18-7 as a director, officer, employee, or agent of the society; or
18-8 (2) an agreement that settles:
18-9 (A) a matter in an action, suit, or other
18-10 proceeding described by Subdivision (1) of this subsection; or
18-11 (B) the threat of the proceeding.
18-12 (d) A society may indemnify or reimburse a person in
18-13 relation to a matter described by Subsection (c) of this article
18-14 only if the supreme governing body, the board of directors, or a
18-15 court of competent jurisdiction determines that:
18-16 (1) the person acted in good faith for a purpose the
18-17 person reasonably believed to be in or not opposed to the best
18-18 interests of the society; and
18-19 (2) in a criminal action or proceeding, the person had
18-20 no reasonable cause to believe that the person's conduct was
18-21 unlawful.
18-22 (e) A determination by a supreme governing body or board of
18-23 directors under Subsection (d) of this article must be made by
18-24 majority vote of a quorum consisting of persons who were not
18-25 parties to the action, suit, or other proceeding under review.
18-26 (f) The termination of an action or other proceeding by
18-27 judgment, order, settlement, or conviction or on a plea of no
19-1 contest does not create a conclusive presumption that a person does
19-2 not meet the standard of conduct required in order to justify
19-3 indemnification and reimbursement.
19-4 (g) The right of indemnification and reimbursement under
19-5 this article is not exclusive of other rights to which a person may
19-6 be entitled as a matter of law and inures to the benefit of the
19-7 person's devisees, legatees, heirs, and estate.
19-8 (h) A society may purchase and maintain insurance on behalf
19-9 of a person who is or was a director, officer, employee, or agent
19-10 of the society or who is or was serving at the request of the
19-11 society as a director, officer, employee, or agent of another firm,
19-12 corporation, or organization against a liability asserted against
19-13 that person or incurred by that person in any capacity or arising
19-14 out of that person's status as a director, officer, employee, or
19-15 agent of the society or the other firm, corporation, or
19-16 organization. A society may purchase and maintain insurance under
19-17 this subsection regardless of whether the society has the power to
19-18 indemnify or reimburse the person with respect to the covered
19-19 liability under this article.
19-20 (i) A director, officer, employee, member, or volunteer of a
19-21 society serving without compensation is not personally liable for
19-22 damages resulting from an act or omission in the exercise of
19-23 judgment or discretion in connection with the duties of that person
19-24 for the society unless the act or omission involved wilful or
19-25 wanton misconduct. This subsection does not limit a society's
19-26 direct or indirect liability.
19-27 SECTION 14. Article 10.30, Insurance Code, is amended to
20-1 read as follows:
20-2 Art. 10.30. ANNUAL REPORTS. (a) Every society transacting
20-3 business in this State shall annually, on or before the first day
20-4 of March, file with the department [State Board of Insurance] in
20-5 such form as the commissioner [Board] may require, a statement
20-6 under oath of its president and secretary or corresponding
20-7 officers, of its condition and standing on the thirty-first day of
20-8 December next preceding, and its transactions for the year ending
20-9 on that date, and shall furnish such other information as the
20-10 commissioner [said Board] may deem necessary to a proper exhibit of
20-11 its business and plan of working. The commissioner [Board] may at
20-12 other times require any further statement it may deem necessary to
20-13 be made relating to such society.
20-14 (b) Each society shall include in its annual report to the
20-15 department [said Board] a valuation of its certificates in force on
20-16 December 31st last preceding. Such report of valuation shall show
20-17 as contingent liabilities the present mid-year value of the
20-18 promised benefits provided in the constitution and laws of such
20-19 society, under the certificates subject to valuation; and as
20-20 contingent assets the present mid-year value of the future net
20-21 contributions provided in the Constitution and laws as the same are
20-22 in practice actually collected. At the option of any society, in
20-23 lieu of the above, the valuation may show the net value of the
20-24 certificates subject to valuation hereinbefore provided, and said
20-25 net value, when computed in case of monthly contributions, may be
20-26 the mean of the terminal values for the end of the preceding and of
20-27 the current insurance years. Such valuation including valuation of
21-1 certificates shall be certified by an actuary, or, at the request
21-2 and expense of the society, verified by the actuary of the
21-3 Department of Insurance of the home State of the society. The
21-4 legal minimum standard of valuation for all certificates, except
21-5 for accident and health benefits, shall be the National Fraternal
21-6 Congress Table of Mortality as adopted by the National Congress,
21-7 August 23, 1899; or, at the option of the society, any table
21-8 producing reserves in the aggregate at least as great as the
21-9 National Fraternal Congress Table of Mortality as adopted by the
21-10 National Fraternal Congress, August 23, 1899; at the option of the
21-11 society, the Commissioners 1941 Standard Ordinary Mortality Table;
21-12 or at the option of the society, the Commissioners 1958 Standard
21-13 Ordinary Mortality Table, except that for any category of such
21-14 certificates issued on female risks, all modified net premiums and
21-15 present values referred to in Article 3.28 of this code may be
21-16 calculated according to an age not more than six (6) years younger
21-17 than the actual age of the insured. The interest assumption to be
21-18 used with any of the preceding mortality tables may not be more
21-19 than four and one-half (4 1/2%) per centum per annum. As an
21-20 alternative, the society may use a table based upon the society's
21-21 own experience of at least twenty (20) years, and covering not less
21-22 than one hundred thousand (100,000) lives with interest assumption
21-23 not more than four (4%) per centum per annum, provided, however,
21-24 that any society may value its certificates in accordance with
21-25 valuation standards otherwise authorized by the laws of this state
21-26 for the valuation of similar policies issued by life insurance
21-27 companies provided that no society may use a table based on its own
22-1 experience for certificates issued on or after January 1, 1989.
22-2 Each such valuation report shall set forth clearly and fully the
22-3 mortality and interest bases and the method of valuation. The
22-4 annual report required by this article shall also include a
22-5 valuation of certificates in accordance with Article 10.07 of this
22-6 code.
22-7 (c) Any society providing for disability benefits shall keep
22-8 the net contributions for such benefits in a fund separate and
22-9 apart from all other benefit and expense funds and the valuation of
22-10 all other business of the society; provided, that where a combined
22-11 contribution table is used by a society for both death and
22-12 permanent total disability benefits, the valuation shall be
22-13 according to tables of reliable experiences, and in such cases a
22-14 separation of the funds shall not be required.
22-15 (d) The annual report herein provided for may be used by the
22-16 department [State Board of Insurance] or the State of Texas in
22-17 determining the financial solvency of the society. A statement of
22-18 the valuation provided by this article and an explanation of the
22-19 facts concerning the condition of the society thereby disclosed
22-20 shall be printed and mailed to each beneficiary [member] of the
22-21 society not later than June 1st of each year; or in lieu thereof,
22-22 such statement of valuation and showing of the society's condition
22-23 as thereby disclosed may be published in the society's official
22-24 paper and the issue containing the same mailed to each beneficiary
22-25 [member] of the society.
22-26 (e) The laws of such society shall provide that if the
22-27 stated periodical contributions of the members are insufficient to
23-1 pay all matured death and disability claims in full, and to provide
23-2 for the creation and maintenance of the funds required by its laws
23-3 additional, increased or extra rates of contributions shall be
23-4 collected from the members to meet such deficiency; and such laws
23-5 may provide that, upon the written application or consent of the
23-6 member, the [his] certificate may be charged with its proportion of
23-7 any deficiency disclosed by valuation, with interest not exceeding
23-8 the rate specified for certificate loans under the certificate
23-9 [five (5%) per centum per annum]. The existence of the right to
23-10 assess members as provided by this article does not affect the test
23-11 for financial solvency of the society. If the owner of a
23-12 certificate is not a member, the assessment shall be levied against
23-13 the owner.
23-14 (f) This chapter may not be construed to prevent or in any
23-15 way limit any action by or remedy available to the department
23-16 [State Board of Insurance] or the State of Texas under Article
23-17 21.28 or 21.28-A of this code or other applicable law.
23-18 SECTION 15. Chapter 10, Insurance Code, is amended by adding
23-19 Article 10.31 to read as follows:
23-20 Art. 10.31. NONFORFEITURE BENEFITS, CASH SURRENDER VALUES,
23-21 CERTIFICATE LOANS, AND OTHER OPTIONS. (a) For a certificate
23-22 issued before January 1, 2001, the value of the paid-up
23-23 nonforfeiture benefit and the amount of a cash surrender value,
23-24 loan, or other option granted under the certificate must comply
23-25 with the law applicable to the certificate immediately before that
23-26 date.
23-27 (b) For a certificate issued on or after January 1, 2001,
24-1 the value of the paid-up nonforfeiture benefit and the amount of a
24-2 cash surrender value, loan, or other option granted under the
24-3 certificate is computed as provided under the provisions of
24-4 Articles 3.44a and 3.44b of this code applicable to life insurance
24-5 companies issuing policies containing similar benefits and under
24-6 the applicable tables established under those articles.
24-7 SECTION 16. Article 10.33(a), Insurance Code, is amended to
24-8 read as follows:
24-9 (a) Each domestic society is subject to Articles 1.15,
24-10 1.15A, and 1.16 of this code.
24-11 SECTION 17. Articles 10.05-1 and 10.05-2, Insurance Code,
24-12 are repealed.
24-13 SECTION 18. (a) This Act takes effect January 1, 2000,
24-14 except that Section 17 of this Act takes effect January 1, 2001.
24-15 (b) The change made by this Act to Article 10.15, Insurance
24-16 Code, applies only to a certificate that is delivered, issued for
24-17 delivery, or renewed on or after January 1, 2001. A certificate
24-18 that is delivered, issued for delivery, or renewed before January
24-19 1, 2001, is governed by the law as it existed immediately before
24-20 the effective date of this Act, and that law is continued in effect
24-21 for that purpose.
24-22 SECTION 19. The importance of this legislation and the
24-23 crowded condition of the calendars in both houses create an
24-24 emergency and an imperative public necessity that the
24-25 constitutional rule requiring bills to be read on three several
24-26 days in each house be suspended, and this rule is hereby suspended.